Pricing Tricks Retailers Use To Take More of Your Money
There’s no doubt that retailers have figured out pricing tricks designed solely to separate you from your money. In fact, they often hire psychologists to determine how best to set their pricing and even how to set up store displays to get you to open your wallets wide. These pricing tricks exist because they absolutely work. They have even grown more elaborate as online shopping has flourished the past ten years. Here are six of the most common pricing tricks retailers currently use, along with handy tips to fight back and keep more of your money.
Decoy pricing is a pricing tactic used by retailers to trick your brain into buying an item based almost entirely on perceived value.
Steve Jobs was a master at decoy pricing and Apple still does a great job with it today.
Take the Apple Watch for example, it currently has over 30 models to pick from, ranging in price from $349 to over $15,000.
All of the watch models with a price tag over $10,000 (there are 8) are simply a decoy to make the $349-$549 versions seem like a great value.
Apple’s goal was never to convince mass quantities of consumers to buy the ultra expensive watch models, but rather to sell a zillion of the cheaper models.
The expensive models serve as a reference to our brains that, “Wow, I can get almost the same watch for under $350. Sold!”.
To avoid falling prey to decoy pricing, it’s wise to consider your needs first, then find the best version of that product that fills those needs in a price range you can afford.
Dynamic pricing is used by retailers to get you to spend what they think you can afford, and thus change the price accordingly.
Some online retailers will go so far as to raise the price depending on factors like your physical address or zip code, while others will dynamically change the price based on your web browsing and buying history.
A few popular retailers who’ve been known to use this tactic include Amazon, The Home Depot, Staples, and Orbitz.
If you suspect the price a website is charging you is dynamically changing, you’re probably getting messed with.
A simple way to test out your theory is by putting your browser in “Incognito Mode” (Directions), or by simply disabling 3rd party cookies (Directions).
Once you’ve done either of these, check the retailer’s website to see if the price changed.
Essentially you’ve blocked the retailer from tapping into your browsing and buying history and charging you accordingly.
Another tip is to check the price on your mobile device to see if the price is different as many retailers will charge you differently depending on whether you’re browsing from a PC, Mac, or mobile.
The bottom-line is to always do a quick price comparison so you know what the best price is, then never accept a higher price.
Charm pricing is fairly obvious.
Whenever you see a product priced at $29.99 or $9.98, the retailer is attempting to “charm” your brain by marking prices just below a round number.
Because our brains are trained to read from left to right, the first digit is the one that sticks in our head and the number we use to decide if the “price is right”.
This phenomenon is known as the left-digit effect and studies have shown that it absolutely works and has a big impact on our buying decisions.
So whenever you see a price ending with a .99 or .98, get in the habit of rounding up, then decide if it’s a good deal.
If you’re a couponer, you’re probably already familiar with high-low pricing.
It’s when retailers have relatively high everyday prices, then frequently release coupons to make you think you’re getting an amazing discount via the coupon.
In reality, retailers that use high-low pricing know they’ll sell minimal items at full-retail, and if they do, it’s a bonus.
Popular retailers where you’ll often see this pricing technique include Ann Taylor, JCPenney, Kohl’s, and Old Navy.
While this is prevalent at brick and mortar stores, you’ll also see it when shopping online.
Many websites like American Eagle, Gap, J.Crew, and Aeropostale will set all of their online prices to full retail just before releasing a coupon code to the public.
Often times the site-wide sale they had prior to releasing the coupon will actually save you more money.
Your best bet to combat high-low pricing is to try and combine a site-wide sale with a coupon code to maximize your savings.
“Open the Wallet” Pricing
This is the technique of pricing items really cheap in the front display aisles at retail and grocery stores to get your brain excited about saving a bunch of money.
It’s physiological warfare and your money is at risk.
Namely, spending money on stuff you had no intention of buying but simply can’t pass up as the “deal” is just too good.
Target, Walmart, Old Navy, and Home Depot are a few of the retailers famous for these “Open the Wallet” displays.
By knowing exactly what these stores are trying to do, you can walk-by these displays and stay focused on the reason you walked in.
Prestige pricing is seen mainly with luxury brands, retailers, and websites.
It’s a trick that makes you think because a price is high, it must indicate the quality is superior to cheaper versions of the same product.
In other words, expensive = good. While sometimes this is definitely true, often times it isn’t.
Examples of prestige pricing that jump to mind include jewelry, automobiles, perfume, handbags, and cosmetics.
Price tags with prestige pricing often end with .00, because odd pricing like .99 or .74 typically makes us think the item must be discounted or of lesser quality.
The best way to avoid prestige pricing, especially when making an expensive purchase, is to always do ample research.
Read user reviews of the product to determine if the prestige price is worth it in terms of overall value.
Also, determine if it’s simply a status purchase, in which case, you might be okay with the price.
Just be aware, that often, the cheaper version will suffice.
Ask the Reader: Have you ever fallen prey to any of these sneaky pricing tricks? If so, how do you keep it from happening again? As usual, I look forward to your comments.
By Kyle James